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News and Sectoral Comovement

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Author Info
Michael J. Lamla () (Department of Management, Technology, and Economics, ETH Zurich)
Sarah M. Lein () (Department of Management, Technology, and Economics, ETH Zurich)
Jan-Egbert Sturm () (KOF Swiss Economic Institute, ETH Zurich)

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Abstract

This paper tests the existence of strategic information complementarities as a source of sectoral comovement. A theoretical model derived in Veldkamp and Wolfers (2007) explains sectoral comovement by the assumption that firms rely too much on aggregate information to make output decisions. We find empirical support for this hypothesis: news on aggregate developments, on average, affect firms production plans significantly more than news on sector-specific developments. This result is based on a rich dataset on firm survey and media releases for Germany comprising 01/1999-07/2006.

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Publisher Info
Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 07-183.

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Length: 32 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:kof:wpskof:07-183

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Related research
Keywords: Media reporting; news; expectation driven business cycles; information com- plementarities; sectoral comovement.;

Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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    Other versions:
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    Other versions:
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  6. Beaudry, Paul & Portier, Franck, 2004. "When Can Changes in Expectations Cause Business Cycle Fluctuations in Neo-Classical Settings?," IDEI Working Papers 304, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  7. Ulrich Fritsche & Sabine Stephan, 2000. "Leading Indicators of German Business Cycles: An Assessment of Properties," Discussion Papers of DIW Berlin 207, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  8. Nir Jaimovich & Sergio Rebelo, 2006. "Can News About the Future Drive the Business Cycle?," NBER Working Papers 12537, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Andreas Hornstein, 2000. "The business cycle and industry comovement," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 27-48. [Downloadable!]
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    Other versions:
  11. Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November. [Downloadable!] (restricted)
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  15. Schmitt-Grohe, Stephanie, 1997. "Comparing Four Models of Aggregate Fluctuations due to Self-Fulfilling Expectations," Journal of Economic Theory, Elsevier, vol. 72(1), pages 96-147, January. [Downloadable!] (restricted)
    Other versions:
  16. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August. [Downloadable!] (restricted)
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